Climate-focused blueprint for resilient economic growth and development

The world is in dire need of fresh thinking and more equitable relationships between the Global North and South, especially as we grapple with the urgent challenge of climate change. One such issue that has come to the forefront is the Carbon Border Adjustment Mechanism (CBAM), introduced by the European Union.

The CBAM aims to reduce carbon leakage by taxing imports based on embedded carbon emissions. However, its impact on developing countries, particularly in Africa, is multifaceted and presents both challenges and opportunities.

Challenges for Developing Countries, Especially Africa:

The CBAM poses several potential risks for African countries. Exporters risk losing competitiveness in the EU market due to added carbon costs, even if they currently do not export directly in sectors covered by CBAM (cement, steel, fertilizers, aluminum, hydrogen, electricity). Compliance costs also increase, straining limited administrative and technological capacities typical of many developing countries.

Moreover, the CBAM could distort global trade, affect value chains crossing multiple countries, and redirect investment towards countries with carbon pricing mechanisms or stronger institutional capacity, potentially sidelining less equipped African nations. Critics have labelled CBAM as a disguised trade barrier that disproportionately burdens developing countries, raising concerns about fairness and WTO compatibility.

Potential Solutions and Fairer Trade Rules:

To mitigate these impacts, several solutions have been proposed. Offering long-term contracts or financial incentives to suppliers who decarbonize production can help integrate developing countries into greener value chains and offset compliance costs.

Proposals suggest recognising carbon mitigation credits from developing countries as offsets against CBAM duties, creating a market for ‘carbon tax assets,’ enabling exporters to reduce CBAM payments and stimulate climate finance in developing regions.

Enhancing administrative and technical capacities in developing countries is crucial for compliance and measuring emissions accurately. The EU's use of trade agreements with sustainable development chapters could help align climate goals with development needs, providing a platform for negotiation and support.

International cooperation and dialogue are key to ensuring that CBAM evolves with input from developing countries and multilateral bodies to balance climate objectives with development priorities.

A Path Forward:

While the CBAM risks economic challenges for African and other developing countries, policy solutions focused on financial incentives, carbon credit markets, capacity building, and fair trade rule design can promote a just transition to sustainable industrial practices.

It is crucial that the CBAM is implemented through a transparent, multilateral framework that acknowledges differences in countries' historical responsibility and capacity to respond. Developing countries need reliable access to green technologies, investments, and international markets for the shift to low-carbon economies.

The securitisation of international trade threatens to disrupt global supply chains, limit access to emerging technologies, and reinforce existing power imbalances. A new climate-trade framework should uphold the principles of justice and solidarity, ensuring that developing countries are actively supported on their path to a more sustainable future.

In the end, achieving a just energy transition and ambitious global climate action requires trade rules that foster equitable development. As we navigate this turbulent period, it is essential to remember that cooperation and dialogue are key to creating a more sustainable and equitable world.

[1] Fakir, S. (2025). Achieving a Just Energy Transition and Ambitious Global Climate Action: The Role of Trade Rules. Project Syndicate. [2] European Commission. (2023). Carbon Border Adjustment Mechanism: Frequently Asked Questions. European Commission. [3] World Trade Organization. (2024). Carbon Border Adjustment Mechanisms: Implications for Developing Countries. World Trade Organization. [4] United Nations Framework Convention on Climate Change. (2025). Carbon Border Adjustment Mechanisms and Developing Countries: A Technical Paper. United Nations Framework Convention on Climate Change. [5] African Climate Foundation. (2024). The Impact of the Carbon Border Adjustment Mechanism on African Exporters. African Climate Foundation.

The Carbon Border Adjustment Mechanism (CBAM) introduced by the European Union aims to address carbon leakage but presents significant challenges for developing countries, particularly African nations.
Exporters from developing countries risk losing competitiveness in the EU market due to added carbon costs, straining limited administrative and technological capacities common in these nations.
The CBAM could distort global trade, affect value chains, and divert investment away from less equipped countries, raising concerns about fairness and potential trade barrier implications.
To mitigate these impacts, solutions such as offering financial incentives to suppliers, creating carbon credit markets, and enhancing administrative and technical capacities in developing countries are proposed.
International cooperation, dialogue, and a transparent, multilateral framework that acknowledges differences in countries' historical responsibilities and capacities are essential to balance climate objectives with development priorities.
Achieving a just energy transition and ambitious global climate action necessitates trade rules that foster equitable development, ensuring that developing countries are supported on their path to a more sustainable future.
In unity, scientists, finance, business, and personal-finance sectors, as well as environmental-science and industry experts, must work together to develop a climate-trade framework that promotes sustainability and upholds the principles of justice and solidarity, ultimately creating a more sustainable and equitable world.